<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1995 .
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________.
Commission file no. 0-6272
DATUM INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-2512237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
1363 SOUTH STATE COLLEGE BLVD., ANAHEIM, CA 92806-5790
(Address of principal executive offices) (Zip code)
</TABLE>
(714) 533-6333
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. YES X . NO .
----- -----
The registrant had 4,003,342 shares of common stock outstanding as of
September 30, 1995.
Total number of sequentially numbered pages contained herein are: _____
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INDEX
<TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
A S S E T S 1995 1994
------------- ------------
<S> <C> <C>
Current assets
Cash and short-term investments $ 10,000 $ 221,000
Accounts receivable 12,344,000 5,978,000
Accounts receivable, unbilled 261,000 326,000
Inventories
Purchased parts 6,885,000 2,081,000
Work-in-process 9,261,000 4,465,000
Finished products 3,842,000 446,000
----------- -----------
19,988,000 6,992,000
Prepaid expenses 1,037,000 432,000
Deferred income taxes 869,000 869,000
Income tax refund receivable 208,000 216,000
----------- -----------
Total current assets 34,717,000 15,034,000
Plant and equipment
Land 2,040,000 2,040,000
Buildings 4,458,000 4,450,000
Equipment 13,995,000 6,017,000
Leasehold improvements 1,138,000 878,000
----------- -----------
21,631,000 13,385,000
Less accumulated depreciation and amortization 6,478,000 6,310,000
----------- -----------
15,153,000 7,075,000
----------- -----------
Excess of purchase price over net assets acquired 10,490,000 2,413,000
Other assets 43,000 56,000
----------- -----------
$60,403,000 $24,578,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------- ------------
<S> <C> <C>
Current liabilities
Accounts payable $ 3,600,000 $ 1,598,000
Accrued salaries and wages 1,649,000 1,256,000
Other accrued expenses 1,282,000 476,000
Income taxes payable (319,000) --
Notes payable to bank 9,724,000 3,000,000
Current portion of long-term debt 2,067,000 20,000
----------- -----------
Total current liabilities 18,003,000 6,350,000
----------- -----------
Long-term debt 9,538,000 50,000
----------- -----------
Postretirement benefits 209,000 152,000
----------- -----------
Deferred income taxes 1,143,000 1,143,000
----------- -----------
Stockholders' equity
Common stock, par value $.25 per share
Authorized - 8,000,000 shares
Issued - 4,003,342 shares in 1995
2,668,224 shares in 1994 1,001,000 667,000
Additional paid-in capital 24,076,000 10,294,000
Retained earnings -
Beginning of period 5,922,000 4,986,000
Net income 525,000 936,000
Cumulative translation adjustment (14,000) --
----------- -----------
End of period 6,433,000 5,922,000
----------- -----------
Total stockholders' equity 31,510,000 16,883,000
----------- -----------
$60,403,000 $24,578,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
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<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1995 1994 1995 1994
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net product sales and
contract revenues $18,607,000 $8,044,000 $45,292,000 $23,334,000
----------- ---------- ----------- -----------
Costs and expenses
Cost of products sold and
contract revenues 11,215,000 4,573,000 26,048,000 13,116,000
Selling 2,709,000 1,356,000 6,828,000 3,872,000
Product development 1,963,000 670,000 5,193,000 1,829,000
General and administrative 2,010,000 946,000 5,217,000 2,959,000
Interest expense 477,000 62,000 1,126,000 183,000
Interest income (4,000) (4,000) (10,000) (12,000)
----------- ---------- ----------- -----------
18,370,000 7,603,000 44,402,000 21,947,000
----------- ---------- ----------- -----------
Income before income taxes 237,000 441,000 890,000 1,387,000
Income tax provision 97,000 176,000 365,000 554,000
----------- ---------- ----------- -----------
Net income $ 140,000 $ 265,000 $ 525,000 $ 833,000
=========== ========== =========== ===========
Earnings per common and
common equivalent share $ .03 $ .10 $ .14 $ .32
=========== ========== =========== ===========
Weighted average number
of common and common
equivalent shares outstanding 4,921,000 2,632,000 3,874,000 2,617,000
=========== ========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 6
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
SEPTEMBER 30, September 30,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 525,000 $ 833,000
----------- ----------
Adjustments to reconcile income to net cash provided by
operating activities:
Depreciation and amortization 2,109,000 578,000
Contribution of the Company's shares of common stock 241,000 127,000
Changes in assets and liabilities, net of acquisition:
Increase in accounts receivable (599,000) (92,000)
Decrease in accounts receivable,
unbilled - current portion 65,000 81,000
Decrease in income tax refund receivable 7,000 ----
(Increase) decrease in inventories (4,473,000) 63,000
Increase in prepaid expenses (453,000) (51,000)
Increase in deferred income taxes - current portion ---- (174,000)
Decrease in other assets 13,000 13,000
Increase (decrease) in accounts payable 817,000 (295,000)
Increase in accrued expenses 464,000 20,000
Decrease in income taxes payable (319,000) ----
Increase in postretirement benefits 57,000 57,000
----------- ----------
Total reconciling items (2,071,000) 327,000
----------- ----------
Net cash used in operating activities (1,546,000) 1,160,000
----------- ----------
Cash flows from investing activities:
Book value of equipment disposals 20,000 108,000
Capital expenditures (1,779,000) (662,000)
Payment for acquisition, net of cash (15,290,000) ----
Other (14,000) ----
----------- ----------
Net cash used in investing activities (17,063,000) (554,000)
----------- ----------
Cash flows from financing activities:
Proceeds from (reductions to) line of credit 6,724,000 (1,075,000)
Proceeds from (reductions to) long-term debt and notes payable 11,535,000 (196,000)
Exercise of stock options 139,000 68,000
----------- ----------
Net cash provided by financing activities 18,398,000 (1,203,000)
----------- ----------
Net decrease in cash and cash equivalents (211,000) (597,000)
Cash and cash equivalents at beginning of period 221,000 651,000
----------- ----------
Cash and cash equivalents at end of period $ 10,000 $ 54,000
=========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
In connection with the acquisition of Efratom, the Company issued 1,277,778 shares
of common stock valued at $13,736,000.
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 7
DATUM INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes which would be presented were such
financial statements prepared in accordance with generally accepted accounting
principles, and should be read in conjunction with the audited financial
statements presented in the Company's 1994 Annual Report to Stockholders. In
the opinion of management, the accompanying financial statements reflect all
adjustments which are necessary for a fair presentation of the results for the
interim period presented. The results of operations for such interim period are
not necessarily indicative of results to be expected for the full year.
NOTE B - EARNINGS PER SHARE
Earnings per share is calculated by dividing net earnings by the weighted
average number of common and common equivalent shares outstanding during each
period taking into consideration dilutive effects of common stock equivalents.
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<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" presented in the
Company's 1994 Annual Report to Stockholders.
Overview
Datum designs, manufactures and markets a wide variety of high-quality, high
performance time and frequency products used to synchronize the flow of
information in telecommunications and enterprise computing networks. Datum also
is a leading supplier of high-performance timing products for a wide variety of
scientific and industrial test and measurement applications.
On March 17, 1995, Datum completed its acquisition of Efratom, the inventor and
leading supplier of high-stability, rubidium-based oscillators widely used in
cellular and PCS systems. The purchase price consisted of $15,000,000 cash and
1,277,778 shares of Datum's Common Stock. The cash portion of the purchase
price is subject to a post-closing adjustment yet to be determined. See
"Liquidity and Capital Resources." The transaction has been accounted for as a
purchase and, accordingly, the acquired assets and liabilities have been
recorded at their estimated fair market values at the date of the acquisition.
In connection with the acquisition, Datum recorded $8,469,000 in goodwill,
subject to a post-closing adjustment which amount will be amortized (and
charged against earnings) for 15 years from the date of the acquisition.
As a result of the acquisition, Datum has experienced significant increases (in
absolute terms) in revenue, selling expenses, general and administrative
expenses, accounts receivable, inventory and accounts payable, in the quarter
and nine months ended September 30, 1995 from the corresponding periods of
1994. In addition, Datum has experienced, and expects to continue to
experience, material changes (in percentage terms) in certain areas of its
operations as a result of the acquisition of Efratom. Efratom has historically
experienced substantial fluctuations in quarterly operating results because of
its dependence on relatively few major customers and the ordering patterns of
its customers and other factors. The future operating results of Datum may
exhibit similar fluctuations due to the combination with Efratom. Other
factors that could cause Datum's sales and operating results to vary
significantly from period to period include timing of deliveries of new
products, contractual commitments to reduce prices of goods sold, mix of
products sold, fluctuating market demand, new product introductions by
competitors, disruptions in delivery of components or subsystems and general
economic conditions. Due to contractual obligations and the nature of its
manufacturing processes, Efratom maintains higher levels of inventories, both
on absolute and percentage basis, than Datum historically maintained. As a
result, Datum anticipates that inventories, as a percentage of total assets,
will continue above previous levels, which will have the effect of increasing
Datum's working capital requirements. In addition, Efratom traditionally has
had higher research and product development expenses as a percentage of net
sales, and Datum anticipates maintaining such higher level of expenditures.
A small number of customers account for a substantial portion of Datum's net
sales. There can be no assurance that a major customer will not reduce, delay
or eliminate its purchases. Any such reduction, delay or loss in orders could
have a material adverse effect on Datum's business and results of operations.
Results of Operations
The following table sets forth, for the fiscal periods indicated, certain
income and expense items expressed as a percentage of Datum's total sales:
<TABLE>
<CAPTION>
Percentage of Total Sales
----------------------------------------------------------------------------
Year Ended December 31, Nine Months Ended September 30,
---------------------------------- -------------------------------
1992 1993 1994 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net product sales and contract revenue 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Cost of products sold and contract 64.8% 59.6% 56.6% 56.2% 57.5%
revenue . . . . . . . . . . . .
Selling . . . . . . . . . . . . . . 16.7% 18.1% 16.8% 16.6% 15.1%
Product development . . . . . . . . 6.7% 7.6% 8.1% 7.8% 11.5%
General and administrative . . . . 15.4% 13.4% 12.7% 12.7% 11.5%
Interest expense . . . . . . . . . 1.1% 0.8% 0.8% 0.8% 2.5%
Interest income . . . . . . . . . . 0.0% 0.0% 0.0% (0.1%) 0.0%
Income (loss) before income taxes. . . (11.0%) 0.4% 5.0% 5.9% 2.0%
Income tax provision (benefit) . . . . (2.9%) 0.1% 2.0% 2.4% 0.8%
Net income (loss) . . . . . . . . . . (8.1%) 0.3% 3.0% 3.5% 1.2%
</TABLE>
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<PAGE> 9
Consolidated net product sales and contract revenues increased by 131.3% for
the quarter ended September 30, 1995, when compared to the corresponding
quarter of 1994. For the nine month period of 1995, the sales increase was
94.1% when compared to the same three quarters of 1994. The increases were
primarily due to the acquisition of Efratom on March 17, 1995. Contract
revenues as a component of total revenues are not significant.
Cost of products sold and contract revenues as a percentage of product sales
for the quarter ended September 30, 1995, was 60.3%, compared with 56.8% for
the corresponding quarter of 1994. For the nine month period of 1995, cost of
products sold was 57.5% compared with 56.2% in 1994. The mix of products sold,
specifically by Efratom, contributed to a higher than average cost in the third
quarter.
Selling expense increased by $1,353,000 for the quarter ended September 30,
1995 over the similar period in 1994, as a result of the acquisition of
Efratom, the addition of a telecommunications sales organization, and the
expansion of its enterprise computing operations. However, sales expense as a
percentage of product sales decreased to 14.6% for the quarter ended September
30, 1995, from 16.9% for the corresponding quarter of 1994.
Product development expense as a percentage of product sales increased to 10.5%
for the quarter ended September 30, 1995, compared with 8.3% for the
corresponding quarter of 1994. In the absence of the acquisition of Efratom,
product development expense as a percentage of product sales would have
increased from 8.3% to 9.0% due to increased telecommunication product
development. In addition, Efratom product development expense, as a percentage
of product sales, is higher than that of the other divisions of Datum.
General and administrative expense increased by $1,064,000 to $2,010,000 for
the quarter ended September 30, 1995. Of this increase, $783,000 was due to
the addition of Efratom which was not in the corresponding quarter of 1994. An
additional $350,000 of the increase was due to amortization of excess purchase
price of the Efratom acquisition, also not in the corresponding quarter of
1994. General and administrative expense as a percentage of product sales
decreased to 10.8% in the quarter ended September 30, 1995, compared to 11.8%
in the corresponding quarter of 1994 (as a result of a larger sales volume).
Interest expense increased for the quarter ended September 30, 1995 to $477,000
from $62,000 in the corresponding quarter of 1994. This is due to the
borrowing of $15 million for part of the Efratom purchase price and up to an
additional $12 million to cover the increased daily working capital needs of
the combined operations. The borrowing level at September 30, 1995 was $21.3
million.
Net income as a percentage of product sales decreased to 0.8% in the current
quarter from 3.3% in the same quarter of 1994. The mix of products sold, the
added cost of product development, increased amortization of excess purchase
price, and interest expense due to the acquisition of Efratom, accounted for
this differential.
Direct and indirect sales to the United States Government for the three and
nine month periods ended September 30, 1995 were $3,934,000 and $18,606,000,
respectively, compared to $2,409,000 and $7,898,000 for the corresponding prior
year periods. These sales are subject to various risks, including
unpredictable reductions in funds available for Datum's projects and contract
termination at the convenience of the government. A significant portion of
Datum's U.S. government business is also subject to reduction or termination
due to government policy changes, such as reductions in military defense
spending.
International sales accounted for 19.6% and 21.3% of total sales for the three
and nine months ended September 30, 1995, compared to 23.6% and 21.8% for the
corresponding year periods. International sales expose Datum to certain risks,
including different or changing standards in international telecommunications
systems, the difficulty and expense of maintaining foreign sales distribution
channels, barriers to trade, fluctuations in foreign currency exchange rates,
availability of suitable export financing, export license requirements and
other domestic and foreign regulations that may apply to the export of Datum's
products.
The common and common equivalent shares and the resulting earnings per share
were affected by the lower net income and by the shares issued to Ball
Corporation for the acquisition of Efratom on March 17, 1995 and, to a lesser
extent by the exercise of stock options adding to outstanding shares.
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<PAGE> 10
Liquidity and Capital Resources
Accounts receivable, including accounts receivable unbilled, increased from
$6,304,000 at December 31, 1994 to $12,605,000 at September 30, 1995. The
major reason for the increase is the presence of Efratom receivables of
$6,315,000 not applicable on December 31, 1994.
Inventories increased from $6,992,000 at December 31, 1994, to $19,988,000 at
September 30, 1995. The increase is primarily the result of $12,139,000 of
Efratom inventories not present on December 31, 1994. Datum anticipates
continuing increased levels of inventories which will result in increased
demand on capital resources.
Prepaid expenses increased from $432,000 at December 31, 1994 to $1,037,000 at
September 30, 1995. The Efratom acquisition added $690,000 not present at
December 31, 1994.
Accounts payable increased from $1,598,000 at December 31, 1994 to $3,600,000
at September 30, 1995. Efratom accounts payable accounted for $1,643,000 of
that difference.
At September 30, 1995, the Company had working capital of $16,714,000 and a
current ratio of 1.9:1. This compares to working capital of $8,684,000 and a
current ratio of 2.4:1 at December 31, 1994. The decline in the current ratio
is the result of additional financing associated with the Efratom acquisition.
On March 17, 1995, the Company entered into an arrangement with its bank for a
credit facility, which was amended on August 31, 1995, containing: (i) a
$14,000,000 revolving line of credit; (ii) a $2,500,000 term loan payable over
six (6) years; (iii) a $2,500,000 term loan amortized over twenty-five (25)
years, payable in five (5) years; (iv) a $6,000,000 term loan payable over four
(4) years; (v) a $2,000,000 term commitment to be repaid in thirty-six (36)
equal installments beginning January 1996. All of the loans have interest
payable at the bank's prime rate plus .5% to .75%. The loans are secured by
accounts receivable, inventory, real estate and equipment of the Company. The
credit arrangement is effective through June 6, 1996. The borrowing level at
September 30, 1995 was $21.3 million.
The notes payable to the bank of $9,724,000 at September 30, 1995 reflects the
revolving line with the bank which can be increased to a maximum of
$14,000,000. This September 30, 1995 balance includes $4,000,000 utilized for
a portion of the $15,000,000 cash purchase price of Efratom. The additional
usage is to cover the higher levels of accounts receivable and inventory.
The current portion of the long-term debt reflects the banking arrangements
described above which are due and payable in the next twelve (12) months.
Datum expects continued capital requirements for expansion of its manufacturing
facilities and to finance increases in revenue. Datum does not currently
anticipate meeting additional capital requirements through its credit
arrangements, but may seek additional capital resources from the sales of
equity, debt or convertible securities. There can be no assurance that any
additional financing will be available if and when desired on terms acceptable
to Datum, or that such additional financing, if available, would not result in
dilution of the equity interests of existing stockholders. The ability of
Datum to raise additional debt or equity capital will depend upon its financial
condition, results of operations, covenants and limitations of outstanding debt
obligations, and general economic conditions.
The acquisition of Efratom was concluded subject to a potential purchase price
adjustment based on a closing date statement of working capital. Ball
Corporation and Datum are finalizing the values necessary to determine the
closing date balance sheet and Datum anticipates resolving this adjustment
before year end. Any purchase price adjustment will be reflected in excess of
purchase price over net assets acquired and is not expected to be material to
results of operations.
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<PAGE> 11
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted because the related information is either
inapplicable or has been previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
10.30.1 First Amendment to Credit Agreement
dated as of August 31, 1995 by and between Datum
and Wells Fargo, National Association
27.2 Financial Data Schedule
(b) No current reports on Form 8-K were filed during the quarter
covered by this report.
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<PAGE> 12
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATUM INC.
/s/ Louis B. Horwitz Date November 13, 1995
- --------------------------------------- -----------------------
Louis B. Horwitz, President
/s/ David A. Young Date November 13, 1995
- --------------------------------------- -----------------------
David A. Young, Chief Financial Officer
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<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ------------
<S> <C>
10.30.1 First Amendment to Credit Agreement dated as of
August 31, 1995 by and between Datum and Wells
Fargo, National Association
27.2 Financial Data Schedule
</TABLE>
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<PAGE> 1
EXHIBIT 10.30.1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Agreement") is entered
into as of August 31, 1995, by and between DATUM INC., a Delaware corporation
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
R E C I T A L S
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms
and conditions of that certain Credit Agreement between Borrower and Bank dated
as of December 16, 1994, as amended from time to time ("Credit Agreement");
WHEREAS, Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and have agreed to amend the
Credit Agreement to reflect said changes;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
Credit Agreement shall be amended as follows:
1. Section 1.1(a) is hereby amended by deleting "ELEVEN MILLION
DOLLARS ($11,000,000,)" as the maximum principal amount available under the
Line of Credit, and by substituting for said amount "FOURTEEN MILLION DOLLARS
($14,000,000)," with such change to be effective upon the execution and
delivery to Bank of a promissory note substantially in the form of Exhibit A
attached hereto (which promissory note shall replace and be deemed the
<PAGE> 2
Line of Credit Note defined in and made pursuant to the Credit Agreement)
and all other contracts, instruments and documents required by Bank to evidence
such change.
2. Section 1.1(a)(viii) of the Credit Agreement is hereby deleted
in its entirety, and the following substituted therefor:
"(viii) that portion of any account from an account debtor
other than AT&T which represents the amount by which the
Borrowing Base Parties' total accounts from said account
debtor on a combined basis exceeds twenty- five percent (25%)
of the Borrowing Base Parties' total accounts on a combined
basis; that portion of any account from AT&T which represents
the amount by which the Borrowing Base Parties' total accounts
from AT&T exceeds thirty percent (30%) of the Borrowing Base
Parties' total accounts;"
3. The following is hereby added to the Credit Agreement as
Section 1.4.1.:
"SECTION 1.4.1. TERM COMMITMENT.
(a) Term Commitment. Subject to the terms and
conditions of this Agreement, Bank hereby agrees to make
advances to Borrower from time to time up to and including
January 10, 1996, not to exceed the aggregate principal amount
of TWO MILLION DOLLARS ($2,000,000.00) ("Term Commitment"),
the proceeds of which shall be used to finance capital
expenditures, and which shall be converted on January 10,
1996, to a term loan, as described more fully below.
Borrower's obligation to repay advances under the Term
Commitment shall be evidenced by a promissory note
substantially in the form of Exhibit E attached hereto ("Term
Commitment Note"), all terms of which are incorporated herein
by this reference.
(b) Limitation on Borrowings. Notwithstanding
any other provision of this Agreement, the aggregate amount of
all outstanding borrowings under the Term Commitment shall not
at any time exceed a maximum of Two Million Dollars
($2,000,000.00).
(c) Borrowing and Repayment. Borrower may from
time to time during the period in which Bank will make
advances under the Term Commitment borrow and partially or
wholly repay its outstanding borrowings, provided that amounts
repaid may not be reborrowed, subject to all the limitations,
terms and conditions contained herein; provided however, that
the total outstanding borrowings under the Term Commitment
shall not at any time
2
<PAGE> 3
exceed the maximum principal amount available thereunder, as
set forth above. The outstanding principal balance of the
Term Commitments shall be due and payable in full on January
10, 1996; provided however, that so long as Borrower is in
compliance on said date with all terms and conditions
contained herein and in any other documents evidencing the
Credits, Bank agrees to restructure repayment of said
outstanding principal balance so that principal shall be
amortized over three (3) years and shall be repaid in
thirty-six (36) equal monthly installments.
(d) Prepayment. Borrower may prepay principal on
the Term Commitment at any time, in any amount, without
penalty. All prepayments shall be applied on the most remote
principal installment(s) then unpaid.
(d) Loan Fee. Borrower shall pay to Bank a
non-refundable loan fee for the Term Commitment equal to
$15,000.00 which loan fee shall be due and payable in full
immediately upon demand by Bank."
4. Section 1.5. of the Credit Agreement is amended by adding the
Term Commitment to the enumeration of the Credits, and the Term Commitment Note
to the enumeration of Notes. The Term Commitment is hereby deemed to be one of
the Credits and the Term Commitment Note to be one the Notes.
5. Section 1.9. is hereby deleted in its entirety, and the
following substituted therefor:
"SECTION 1.9. GUARANTIES. All indebtedness of Borrower to
Bank pursuant to this Agreement shall be guaranteed by
Austron, Systems and the Company (each, a "Guarantor") in the
principal amount of Twenty-Seven Million Dollars
($27,000,000.00) each, as evidenced by and subject to the
terms of guaranties in form and substance satisfactory to
Bank."
6. Borrower has advised Bank that Borrower intends to offer
additional shares of its common stock for sale to the public (the "Offering").
The Offering is expected to be completed in November of 1995. With regard to
the Offering,
(a) Borrower hereby represents and
warrants to Bank that the Offering shall comply with
all applicable laws and regulations; and
3
<PAGE> 4
(b) Borrower hereby agrees to use
proceeds from the Offering to prepay all amounts
outstanding under Term Loan I and Term Loan III,
which prepayment shall be made on or before December
31, 1995.
7. Borrower shall cause Austron and Systems to execute and
deliver to Bank modifications to the deed of trust and mortgage previously
executed by them, which modifications shall be in form and substance
satisfactory to Bank.
8. Except as specifically provided herein, all terms and
conditions of the Credit Agreement remain in full force and effect, without
waiver or modification. All terms defined in the Credit Agreement shall have
the same meaning when used in this Amendment. This Amendment and the Credit
Agreement shall be read together, as one document.
9. Borrower hereby remakes all representations and warranties
contained in the Credit Agreement and reaffirms all covenants set forth
therein. Borrower further certifies that as of the date of this Amendment
there exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the day and year first written above.
DATUM INC. WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Louis B. Horwitz By: /s/ Timothy R. Sandel
----------------------------- --------------------------
Louis B. Horwitz Timothy R. Sandel
Chief Executive Officer Assistant Vice President
By: /s/ David A. Young
-----------------------------
David A. Young
Chief Financial Officer
4
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 12,694
<ALLOWANCES> 89
<INVENTORY> 19,988
<CURRENT-ASSETS> 34,717
<PP&E> 21,631
<DEPRECIATION> 6,478
<TOTAL-ASSETS> 60,403
<CURRENT-LIABILITIES> 18,003
<BONDS> 9,538
<COMMON> 1,001
0
0
<OTHER-SE> 30,509
<TOTAL-LIABILITY-AND-EQUITY> 60,403
<SALES> 18,607
<TOTAL-REVENUES> 18,607
<CGS> 11,215
<TOTAL-COSTS> 17,897
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 473
<INCOME-PRETAX> 237
<INCOME-TAX> 97
<INCOME-CONTINUING> 140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
